JP/Infrastructure projects key to safeguarding economy

The government and businesses seem to have agreed on one solution that could mitigate the impact of the global slowdown while also creating millions of new jobs -- to accelerate government-led infrastructure projects.

Up to Rp 100 trillion (about US$$9.95 billion) of funds have been set aside to finance projects developing ports, turnpikes, railways, bridges, water irrigation systems and others, with the government already putting out the tenders for some of these projects.

Sri Mulyani Indrawati, Finance Minister who is also acting Coordinating Minister for Economy, said recently that these ongoing tenders were mostly managed by the Public Works Ministry.

"I'm asking other government and regional administrative units to follow suit so that infrastructure projects can start no later than Jan. 5," Mulyani said.

Bambang Susantono, a deputy to the coordinating minister for the economy, in charge of infrastructure, recently said that: "We have begun to tender projects to speed up infrastructure development in 2009. Infrastructure determines (our) competitiveness (with other countries)."

Funding for infrastructure projects comes from long-term investment, which may be difficult to obtain during an economic downturn as may investors prefer quick-yielding investments. Therefore it rests on the shoulders of government to push these projects, Bambang said.

Indonesia's economy may grow by as little as 4.5 percent in 2009 due to the global economic downturn, which will hit exports and investment, a drop from the expected 6.1 percent economic growth this year.

The government has said it will speed up government spending as early as January to boost the economy. In the first three quarters of 2008, the economy grew by 6.3 percent from a year earlier, according to the Central Statistics Agency (BPS).

Mulyani said that Rp 24 trillion would be channeled to local administrations to strengthen their capacity to implement key infrastructure projects in the regions.

"We will continue transferring infrastructure funds to regional administrations, and they should increase the share of their budgets on activities that create more jobs," she said.

In addition to the Rp 24 trillion, the government also plans to spend Rp 72 trillion on numerous infrastructure-related projects conducted by central government units in early 2009.

Of the total, Rp 25.8 trillion will be spent by the Public Works Ministry, Rp 12.6 trillion by the Transportation Ministry, Rp 4.5 trillion by the Energy and Mineral Resources Ministry, Rp 3.5 trillion by the Trade Ministry, Rp 2.8 trillion by the Finance Ministry, Rp 2.2 trillion by the Religion Affairs Ministry, Rp 1.1 trillion by the Fishery and Maritime Ministry and Rp 1 trillion by the Education Ministry.

M.S. Hidayat, chairman of Indonesia's Commerce and Industry Chambers (Kadin), said that infrastructure projects were one way to help compensate for possible massive layoffs in 2009 as industries cut production capacity because of weakening demand.

"The Rp 100 trillion of infrastructure projects would be one way to safeguard the economy from the impact of the global crisis. Kadin welcomes this initiative and will cooperate to help make this program a success," Hidayat said.

The government has estimated that about $65 billion will be needed in new infrastructure investment in the next three years. It estimates that next year's infrastructure projects would be able to absorb up to 1.1 million new workers.